The Impact of Temperature on Productivity and Labor Supply: Evidence from Indian Manufacturing(with E. Somanathan, Meenu Tewari and Rohini Somanathan)

Global Climate Change Research

Cross-country studies have found that hotter years are associated with lower output in poor countries. Using high-frequency micro-data from manufacturing firms in India, we show that worker heat stress can substantially explain this correlation. Ambient temperatures have non-linear effects on worker productivity, with declines on hot days of 4 to 9 percent per degree rise in temperature. Sustained heat also increases absenteeism. Similar temperature induced productivity declines are replicated in annual plant output from a national panel. Our estimates imply that warming between 1971 and 2009 may have decreased manufacturing output in India by at least 3 percent relative to a no-warming counterfactual. We show that workplace climate control may enable adaptation but nevertheless failing to account for the impact of temperature on labor may considerably underestimate the costs of climate change.​